Aulerich, Nicole M.Irwin, Scott H.Nelson, Carl H.The Impact of Measurement Error on Estimates of the Price Reaction to USDA Crop Reports29event studyUSDA Crop Production reportsmeasurement errorIdentification
Through Censoring20072007-04This paper investigates the impact of USDA crop production reports in corn and
soybean futures markets. The analysis is based on all corn and soybean production reports
released over 1970-2006. The empirical analysis compares the typical OLS event
study approach to the new Identification by Censoring (ITC) technique. Corn and soybean
production reports are analyzed both separately and together for impact in corn
and soybean futures prices. ITC proves to be the more useful method because it avoids
the pitfalls of errors in variables that cause downward bias in OLS coefficients. Price
reaction coefficients estimated via ITC are one to four times larger than OLS estimates
for a one price and one event analysis. In the two price, two event case, ITC estimates
are one to six times larger. Market reaction to the unanticipated information in USDA
forecasts is substantially larger than estimated in previous studies.Conference Paper/ Presentation